Question 4

Suppose that Moderna could sell its anti-Covid19 vaccine in Brazil, in Russia or in both. Suppose also that the demand for the Moderna vaccine was QDB = 80 - PB in Brazil and QDR = 40 - PR in Russia., where quantity is in millions of doses and price is in dollars per dose. Last assume that the marginal cost and average variable cost of production of the Moderna vaccine were MC = AVC = $20.

Part a) Suppose that given the current international trade agreements Moderna is allowed sell its vaccine at different prices in different countries. Suppose also that the company can prevent resales.

a.1) In Brazil., how many doses would Moderna sell? At what price? In Russia, how many doses would Moderna sell? At

what price?

a.2) In two separate graphs measuring quantity along the horizontal axis and price along the vertical axis, draw the demand for the Moderna vaccine in Brazil and in Russia and illustrate the profit-maximizing quantities and prices in the two countries.

Part b) Suppose instead that without further investments Moderna was not able to prevent resales and had to charge the same price in all countries.

b.1) If Moderna sold the vaccine both in Brazil and in Russia, how many doses would it sell? At what price?

b.2) If Moderna sold the vaccine in the country with the higher choke price only, how many doses would it sell? At what price? b.3) Explain clearly why in this case Moderna would decide to sell its vaccine in Brazil only.

Part c) Now focus on welfare analysis.

c.1) In words explain who gains and who loses from Moderna being able to prevent resales and to price discriminate.

c.2.) How much money would Moderna be willing to spend in technology that would allow the company to price discriminate? c.3) How much money would Russia be willing to pay to allow the company to price discriminate?